2. The Martindale report
On 15 November 2019, BNY engaged Martindale Consultants to "perform an independent review of the estimated future plugging and abandonment costs". On 18 November 2019, BNY also disclosed their intent "to engage an accounting expert or firm to advise the Trustee regarding the accruals that the Trustee understands PCEC intends to book relating to future plugging and abandonment costs estimated by PCEC".
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BNY never disclosed which accounting expert it retained, but Martindale spotted the obvious: deducting decades of future expected costs up front is a departure from industry practice, which is to deduct costs as they are incurred.​​​​​​​​​​​​​​
In a private email to BNY, Martindale spotted a yet more serious problem: even if PCEC were to depart from industry practice and accrue for future ARO, accruing for several decades of future ARO up front would violate one of the fundamental principles of accounting, which is that expenses be matched in time with the revenues to which they relate.​​​
Indeed, this "matching principle" is codified in ASC 410-20, which states that ARO expenses should be recognized over the useful life of an asset (in oil and gas, this amortization is typically done on a "units of production" basis).
But BNY never disclosed to Unitholders that Martindale considered PCEC's accounting to violate a fundamental principle of accounting. Instead, BNY disclosed in a 29 December 2020 Form 8-K that it had asked PCEC to adjust its accruals in line with Martindale's recommendation that costs be more closely matched in time with revenues. On 24 March 2021, BNY reported that PCEC had refused its requests and that BNY "has determined not to take further action at this time". As recently as the 23 December 2024 Form 8-K, BNY still says that it "has determined not to take further action at this time".